FACTBOX - U.S. bank stress test capital targets, conditions

(Reuters) - U.S. officials on Wednesday laid out capital buffer targets and other conditions for the 19 largest U.S. banks that have been stress tested against a hypothetical sharp downturn in the economy.

Results of the stress tests, which will show how much capital some major institutions may be directed to raise, are due to be released at 5 p.m. (10 p.m. British time) on Thursday.

The government's description of the test and requirements for capital recovery plans included:

CAPITAL TARGETS:

The stress test banks are being directed to achieve capital buffers that would allow them to have a Tier 1 risk-based ratio of at least 6 percent, and a Tier 1 common risk-based ratio of at least 4 percent at the end of 2010 under the more adverse economic scenario set out by the government.

Banks normally are considered "adequately capitalized" if they have a Tier 1 risk-based ratio of at least 4 percent and are only expected to have common equity as the dominant element of that Tier 1 capital.

Under the capital targets, they not only have to meet the higher standard of being "well capitalized," but they have to hold a greater share of common equity.

The emphasis on Tier 1 common capital reflects the view that common equity is critical to absorbing losses and to protect more senior stakeholders and creditors.

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